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TMI Blog2024 (2) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee are as follows: "1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the levying penalty of Rs. 24,00,000/- u/s 271D of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-parte order and hence the case may please be set aside and restored back to the CIT(A)or AO. 3. It is therefore prayed that the above addition may please be deleted as learned members of the Tribunal may deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal." 4. Succinct facts qua the issue are that assessee before us is a Private Limited Company. While passing assessment order in the case of assessee, it was noticed by the Assessing Officer that the assessee had passed entries in its books relating to unsecured loan of Rs. 24,00,000/- received from Shri Mahesh Damjibhai Desai, director of the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalized u/s 271D of the Act. In view of the above, the penalty proceeding u/s 271D was initiated by the Assessing Officer on 27.12.2017 for violating the provisions of section 269SS of the Act which is duly served upon the assessee-company. The assessee did not reply, therefore Assessing Officer imposed a penalty of Rs. 24,00,000/-, under section 271D of the Act. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before NFAC/Ld.CIT(A), who has dismissed the appeal of assessee, observing as follows: "Thus, from the assessment order, it is amply clear that the appellant has contravened the provisions of section 269SS of the Act and further, it has failed to respond/give any explanation as to why penalty u/s 271D should not be levied.in view of these facts, in my considered view, the penalty order passed by the AO does not require any interference and deserves to be confirmed. appeal is, thus, dismissed on merits as well." 7. Aggrieved by the order of NFAC/Ld. CIT(A), the assessee is in further appeal before this Tribunal. 8. Shri P.M. Jagasheth, Learned Counsel for the assessee submitted that during assessment stage, assessee submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Thamira Green Farm (P.) Ltd, [2023] 155 taxmann.com 320 (Chennai - Trib.), wherein it was held that where assessee-company had taken loan from its director in cash for purpose of purchase of lands in name of company, since said transactions between assessee-company and director was in nature of current account transactions, which did not come under purview of loan and deposit as per section 269SS, penalty levied under section 271D was to be deleted. The detailed findings of the Coordinate Bench are as follows: "11. Having said so, let us come back, whether explanation offered by the appellant is bona fide and reasonable or not. According to the appellant, there is a business exigency in accepting cash loan from director because the company does not have any bank account at the given point of time in a place, where the lands has been purchased. Further, the sellers of the land were insisting for payment in cash. Although, the appellant could not explain why it could not open a bank account in the name of the company, but going by the transactions of purchase of land and the place where said transaction had happen, it appears that there is a bona fide reason for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though there is a violation of section 269SS & 269TT of the Act. If you apply above analogy to transactions between the director and the company, then in our considered view transactions inter-se between company and director cannot be treated as violation of section 269SS & 269TT of the Act. Further, even assuming for a moment, but not conceding cash loans received from director, which is in contravention of section 269SS of the Act, but still the appellant company can argue that it is a capital account transactions between director and company. Further, loan transactions between director and company can always be considered as equity capital. If these transactions are considered as equity capital, then it is outside the scope of section 269SS of the Act. In the present case, since it is solitary transaction of loan from one director, it can always be considered as a share capital received from the director. Therefore, for this reason also penalty levied by the Assessing Officer cannot be sustained. 13. At this stage, it is relevant to consider the decision of Hon'ble Madras High Court in the case of Idhayam Publications Ltd. (Supra). 14. Coming back to the case laws relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we are of the considered view that transactions between appellant company and director are in the nature of current account transactions, which does not come under the purview of loan and deposit as per section 269SS of the Act. Therefore, we are of the considered view that the Assessing Officer is erred in levying penalty u/s. 271D of the Act. The ld. CIT(A), without appreciating relevant facts simply sustained penalty levied by the Assessing Officer. Thus, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete penalty levied u/s. 271D of the Act. 18. In the result, appeal filed by the assessee is allowed." 11. From the above judgment of the Coordinate Bench of ITAT Chennai in the case of Thamira Green Farm (P.) Ltd (supra), it is vivid that transaction done during the business exigency does not attract the penalty under section 271D of the Act. We note that in the assessee`s case under consideration the transactions between Directors and assessee-company are on account of business exigency. Besides, assessee-company and the director both have disclosed transactions in their respective books of accounts for the relevant previous year. In the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts made by him in ITA No. No.759/SRT/2023 (supra), may be applied. On the other hand, the Ld. DR for the Revenue has also relied on the arguments advanced in ITA No. No.759/SRT/2023 (supra). 16. Since I have narrated the facts of the assessee's case while adjudicating the penalty in ITA No.759/SRT/2023; the facts narrated in said penalty order are identical and same in ITA No.760/SRT/2023 also, (except quoting section 271E of the Act, by the Assessing Officer). Therefore, the ratio- decendi, that is ratio of my order in ITA No.759/SRT/2023, is squarely applicable to the assessee`s appeal in ITA No.760/SRT/2023 also. As in ITA No.759/SRT/2023, there is an issue of acceptance of loan, whereas in ITA No.760/SRT/2023, there is an issue of repayment of loan on same set of facts and circumstances, hence it does not require separate adjudication. 17. Accordingly, my observations made in ITA No.759/SRT/2023, shall apply mutatis mutandis to the aforesaid other appeal of assessee, namely, in ITA No.760/SRT/2023. For the parity of reasons, I allow the abovementioned appeal of the assessee in terms of directions noted in ITA No.759/SRT/2023 (supra). 18. In the combined result, both appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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